Part of the shortfall in the numbers could come from the fact that Apple misjudged demand for the budget iPhone 5C. During the company’s earnings call this afternoon, Apple CEO Tim Cook admitted, “It was the first time we ever ran that play, and demand percentage turned out to be different than we thought.”

iPhone 5C

In this case, many customers weren’t too impressed with the “new” iPhone 5C and had no problems forking over an extra $100 to step into a more advanced iPhone 5S. "The mix was stronger to the 5S, and it took us some amount of time to build the mix that customers were demanding.”

Apple’s strategy with the iPhone 5C was slightly different than in years past. Before the iPhone 5C, Apple would traditionally introduce a brand new generation of iPhone at the $199 price point (on contract), and simply discount the previous generation model to $99 (on contract).

iPhone 5S

However, with the launch of the iPhone 5S, Apple took things a step further. Apple discontinued the previous generation iPhone 5 and introduced the iPhone 5C, which was essentially the iPhone 5 in a candy-coated plastic shell. Apple hoped that the colorful plastic shell would distract customers from the fact that this was just a warmed over iPhone 5.

In fact, Apple was so confident in its ability to “read” its customers that when the iPhone 5C and iPhone 5S were launched last year, it was the cheaper iPhone 5C that got the most prominent real estate on Apple’s website and the bulk of Apple’s attention in TV spots.

As for why he thinks customers are actually flocking to the iPhone 5S instead, Cook says it’s because of Touch ID. “It's a major feature that has excited people. And I think that, associated with the other things that are unique to the 5S, got the 5S to have a significant amount more attention and a higher mix of sales."

I too thought Apple could keep selling overpriced crap forever. I guess that Tim Cook found the limit. Plastic crap is out. Has to be shiny to command a premium price. Next time they should save the five bucks by using a cheaper processor or less memory. Maybe even a smaller screen. As Apple fans love to remind us, plastic is cheap and junky, and stats don't matter.

For all of the "superior" hardware on high-end android phones, where are the apps that take advantage of if? Where are the games that look like Infinity Blade 3? Why does Samsung continue to use cheap plastic on their flagship phones?

Actually, phones are approaching the point that laptops have reached - where a mid- or low-tier model is "good enough" for most people. Mostly the extra speed is there to quickly finish whatever task you give them phone, before it drops back into low-power mode. I'm finding that memory (RAM) is more important, as I tend to leave about two dozen apps running, and being able to quickly switch between them is nice.

As for an example of superior hardware, I was setting up my new Nexus 5, forgot I'd put it into airplane mode, and said "Ok Google." Surprisingly, it recognized my voice and informed me that although it couldn't reach the network, it could still do local things like look up contacts. i.e. It's running the voice recognition locally on the phone, not transmitting the audio over the network to a server which does the voice recognition like the iPhone does. I'd read in the reviews that the Moto X had dedicated voice recognition hardware, but I was surprised to find similar capability in the Nexus 5 (not sure if it's running entirely in software, or if it's got hardware for it too).

And personal preference, but I play my games on my 24" monitor. Better fps, better visuals, better controls, better sound, more immersive on a bigger screen. While playing a game on my phone is a nice distraction now and then, I'd hardly consider it a suitable standard with which to judge the features of a smartphone.

As for "cheap plastic", the best designed laser printers were the old HP Laserjets. They were a plastic exterior with a metal interior frame. That's the best design. The plastic helps absorb the impact energy from falling or bumping, without breaking. The metal frame protects the innards. The requirements for a phone are a bit different due to the glass screen, but you're mistaken if you automatically think metal exterior = better. For a graphic example, watch this Blendtec video:http://www.youtube.com/watch?v=5MMmLQlrBws

Pay particular attention between 0:30-0:60 when he hits each tablet against the blender. The plastic Nexus 7 bounces back to its original shape - it would survive at least one such impact no worse for wear. The metal iPad Mini instantly deforms - it is a total loss after a single similar impact. (The Kindle clip is cut short before we can see if it would've rebounded to its original shape.)

I think where Apple went wrong was in assuming that quality/functionality of the design was more important to consumers (though I think they were merely trying to cut costs). The lesson for Apple should be that customers shopping for an iPhone 5/5S are looking at its value as a fashion/status symbol, where plastic equates to cheap and metal is more desirable/glamorous/sexy.

Or maybe they finally reached market saturation. Everyone that wants an iPhone, has an iPhone. The number of "new" buyers isn't exceeding the number of people 'defecting' from Apple. At this point, most logical people have figured out that the hardware isn't that radically different anymore and hold onto their old phones for longer. Fanboys not included, obviously. Tough to keep selling devices when they are all essentially the same thing - just not as shiny.